CFA Society Singapore
SINGAPORE (Jan 6): RHB has maintained its “buy” recommendation for BreadTalk Group following a three-year revamp to remove its underperforming stores.
According to Juliana Cai, RHB’s research analyst, the group has closed nine poor performing food atrium stores and will be focused on opening new ones in cities where the group has a strong track record. In fact, Cai believes the segment will turn profitable in 2017.
The group’s bakery segment remains a strong performer, with continued cost management and consistent product innovation. Toast Box has also been introducing new product to increase its ticket sales per head.
“We see further growth opportunities if BreadTalk is able to sell more of its value-added products to its chain of franchisees,” says Cai.
On the other hand, she warns that BreadTalk’s recent move to operate Din Tai Fung restaurants in the UK could result in substantial start-up expenses, long gestation periods, and a slow payback period, if business there does not pick up quickly enough.
Furthermore, a further deterioration in China’s economy could also lead to lower footfalls in malls, and adversely affect BreadTalk’s bakeries and food atriums.
To that end, RHB has a target price of $1.45 for the stock.
Breadtalk’s shares are currently trading at $1.15.